Recently I came across an interesting article from the Harvard Business Review. It was based on a study that suggests that customers are far more likely to buy what another customer buys by simply observing the purchase action vs hearing that customer say they buy the product (Word of Mouth):
“we found that observing other customers wasn’t only very common, it was also strikingly important in shaping consumers’ views of a brand: equally important as word-of-mouth recommendations for mobile handsets and soft drinks, and even more important than word of mouth for technology products and electrical goods. Overall, peer observation was equal in importance to the brand advertising on which companies spend billions.”
This does make sense, although I think there’s an important clarification to this idea that customer observation drives sales at a rate equal to or superior to verbal endorsement from that same customer (Word of Mouth). Mere observation only works if the customer is undecided on which product to purchase. For example, let’s say I am looking for a cake mix, and can’t decide if I want the one from Duncan Hines, or the one from Betty Crocker. Both seem to be about the same as far as quality and price. But if, while I am standing there trying to decide which cake mix to buy, a customer comes up and grabs the Duncan Hines mix, that might persuade me to buy the Duncan Hines mix. If a second customer immediately came up and grabbed the Duncan Hines mix as well, that might cinch the sale for me.
On the other hand, let’s say I am a Duncan Hines fan. I always buy their cake mix because it creates a very moist cake. If my mind is already made up, then it really doesn’t matter how many customers I observe buying the Betty Crocker mix, I will still prefer the Duncan Hines cake mix, because I love how moist it is. But let’s say my cousin comes by, and she notices I am buying the Duncan Hines cake mix. If she says that I should try the Betty Crocker mix, I would be more open to considering that since she’s my cousin and I know and trust her. If she added that I should buy the Better Crocker cake mix because it is more moist than the Duncan Hines cake mix, that might very well convince me to buy the Betty Crocker cake mix.
At any rate, regardless of which cake mix you like (or whether observation or Word of Mouth helped decide your purchase), it should be noted that this underlies the value of customer acquisition flowing through existing customers. We are increasingly placing less trust in advertising that comes from brands, and more trust in messages that come from fellow customers. Even if those messages are shared via simple observation.
Hi Mack,
Great post Mack. Indeed, the underlying value of customer aquisition is through exisiting customers, regardless if you know them or not. Actions can speak as loud as words.
When I worked in retail we would often ask our staff to huddle around/try on/ handle gloves or hats we wanted to move out the door. I think we may have been trying to non-scientifically attract observers to what we wanted to sell. Sometimes it worked. I know when I am in a store and I see a few people huddled around clothing or food products I flock over and often check it out or purchase.
If I remember correctly, Amazon was the first to bring observation online with an information broker which uses consumpion patterns to recommend/show you items other, annoymous people to me are buying. Now that I think of it, booking.com does that with ‘4 people just booked this hotel’ approach. I suppose those are the online equivelants of instore observation.
Thanks Mack. You always keep me thinking.
Great points Kelly, as always! Love your examples of how online sites can use previous purchase patterns to encourage new sales, you’re exactly right!